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What drives urban consumption in mainland china? The role of property price dynamics

  • Chen, Yu-Fu
  • Funke, Michael
  • Mehrotra, Aaron

This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 – 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.

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File URL: http://hdl.handle.net/10943/283
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-50.

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Date of creation: 2011
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Handle: RePEc:edn:sirdps:283
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  3. Chen, Yu-Fu & Funke, Michael & Mehrotra, Aaron, 2011. "What drives urban consumption in mainland china? The role of property price dynamics," SIRE Discussion Papers 2011-50, Scottish Institute for Research in Economics (SIRE).
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